Category Archives: first time buyer benefits

Commentary: CMHC hike a much-needed first step in moderating price growth

Commentary: CMHC hike a much-needed first step in moderating price growth

While real estate professionals have expressed worry that the CMHC’s mortgage insurance premium hike will make purchasing more difficult for hopeful home owners, a long-time industry analyst stated that the decision is an important first step towards ensuring better affordability.

Last week, the CMHC increased the premiums on the mortgage default insurance that home buyers have to service if they put in less than 20 per cent for down payment.

In a recent column for The Globe and Mail, markets observer Rob Carrick described the housing industry’s response to the move as an attempt to score brownie points with the first-time buyer demographic.

“Expect this increase to be added to the grievance list of people who work in the real estate-industrial complex – agents and mortgage brokers, plus others who make a living from home sales. They are working hard to portray first-time buyers as martyrs to government policies designed to cool down the housing market,” Carrick wrote.

Carrick argued that the government, and not the industry’s self-interest, is better situated to effectively deal with the long-running affordability crisis.

“The wrong approach is to offer cosmetic, politically expedient help to young buyers that fails to address the reality that it’s way more of a burden to own a house than it is to buy one.”

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“[These] measures are not just necessary – they may also help to make houses more affordable by containing price increases or causing them to fall,” he added. “CMHC is increasing premiums to boost funds available in case there’s an economic shock of some sort and mortgage defaults soar. High house prices increase this risk because people must stretch their finances to get into the market and then afford the full array of costs as a homeowner.”

Carrick castigated provincial governments for engaging in misguided—and ultimately, harmful—policy responses.

“Ontario is offering a limited break on land-transfer tax, while the B.C. government is offering loans to first-time buyers to help them put together a down payment on homes costing up to $750,000,” Carrick explained.

“Measures like these incrementally support more home buying, which in turns pushes prices higher. Worse, we end up helping people get into the market while ignoring the much more important question of how they’ll be able to afford their mortgage over the long term.”

Source: MortgageBrokerNews.ca – by Ephraim Vecina | 23 Jan 2017
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New program will help first-time homebuyers in BC, but is it a good idea?

first-time buyers bc

 

New program will help first-time homebuyers in BC, but is it a good idea?

It looks like Christmas has come early, at least for some BC house hunters. The BC government has revealed plans to launch a new program for first-time buyers, and it’s expected to help as many as 42,000 households in the province enter the market.

Announced December 15th, the BC Home Owner Mortgage and Equity Partnership program will see the BC government match the amount of money first-time buyers put toward their down payment, to a maximum of $37,500. Loans will be interest free for five years, and recipients won’t have to start paying the money back during that time. Once five years have passed, they will be expected to begin making monthly payments at current interest rates.

“We believe every British Columbian deserves a place to call home,” Premier Christy Clark said in a press release. “We’ve invested in affordable rental housing, we’ve invested in transitional and emergency housing, and now we’re partnering with first-time buyers to make the purchase of their first home more affordable.”

The news came the same day that the BC Real Estate Association released its latest data on residential real estate sales and prices. While it shows that in November the average MLS price for a home in the province fell 6.4 per cent year-over-year to reach $625,871, that’s still out of reach for many first-time buyers.

First-time buyers hoping to participate in the program will have to meet a number of requirements in order to be eligible. For starters, applicants must be planning to buy a home for $750,000 or less and have total annual household income of $150,000 or less; they must also be preapproved for a high-ratio insured mortgage. Other requirements include being a Canadian citizen or permanent resident for at least five years, and living in BC for at least one year.

Reactions to the program have been mixed. While some have taken to Twitterto voice optimism about it, many people, including several key BC housing market commentators, have expressed concerns.

Speaking to The Times Colonist, Tom Davidoff of UBC’s Sauder School of Economics said that making it easier for people to buy homes when the province’s ability to increase housing supply is limited may drive up home prices. “I just think it’s lousy economics,” he said. NDP housing critic David Eby also pointed out that if interest rates are higher in five years, those who participate in the program will be at an increased risk of defaulting on their mortgages.

The program will start accepting applications on January 16th, 2017, and the BC government plans to invest about $703 million in it over the next three years. As there is no cap on the initiative it could eventually be expanded.

Sources: BuzzBuzzHome 

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What’s the best mortgage for the first-time home buyer?

Image courtesy of ddpavumba / FreeDigitalPhotos.net

Q: I’m buying my first home—a starter home—that I plan to live in for the next five to seven years. How do I know which mortgage is right for me?

— Housing Newbie, Toronto 


Answer from Robert McLister, mortgage planner with Ratespy:  There are endless mortgages to choose from so get one-one-one advice when you can. In the meantime, here are four quick tips:

#1.  If you plan to live in the home for five-plus years, then portability (i.e., being able to move the mortgage to a new property without penalty) is less important. But people’s plans change so don’t ignore porting features altogether. The best portability options afford you:

→ The lender’s best rates if you need to add money to the mortgage (helpful if you upgrade to a more expensive home)

→ More time to close your new mortgage after your old home sells (look for 60 days minimum).

#2.  If you don’t foresee moving, refinancing or making big prepayments in the next five years, consider low-frills mortgages. You’ll get a cheaper rate in exchange for smaller prepayment privileges, bigger prepayment charges (aka, penalties) and/or a restriction on refinancing with other lenders before your renewal date.

#3.  Most first-timer buyers choose a 5-year fixed rate because their finances don’t allow for much interest risk. But if you’re financially stable, have great credit and save at least 5% of your income each month, consider shorter fixed terms and variable rates. In our low-rate environment, they’ll give you extra savings.

→ If you do go variable, look for one that keeps your payment the same regardless of interest rate fluctuations. It’s easier for budgeting and gives you peace of mind if rates start climbing.

→  If you can’t decide between fixed or variable, check out a hybrid mortgage. Hybirds let you split your mortgage into two different rates (e.g., half fixed and half variable). They’re a great way to take advantage of lower rates while still protecting yourself if rates climb.

For more tips, have a peek at this mortgage checklist.


Source: MoneySense.ca by March 28th, 2016 

Image courtesy of ddpavumba / FreeDigitalPhotos.net

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Nine ways to power-save your way to a down payment

The question that comes up more and more in the country’s expensive housing markets is: Where are first-time buyers getting the money?

Parental help is a big factor, so much so that the federal agency Canada Mortgage and Housing Corp. has launched a study of the phenomenon. Also, it’s virtually a given that today’s buyers will raid their registered retirement savings plans to use the federal Home Buyers’ Plan. And then there are savings – money put away week by week over a period of years to build a down payment.

I took a look at housing affordability in a recent column and concluded that heroic savings measures are needed by anyone hoping to buy in expensive cities such as Vancouver, Calgary and Toronto. In other words, sacrifices must be made on all your spending, from the day-to-day to special occasions. Here are nine ways to power-save your way to a house down payment in any city:

1. Move in with your parent or in-laws

Explain that you’re thinking strategically in moving back home. The quickest way to get into the housing market is to maximize savings, which is difficult to do when you’re paying the cost of rent in a big city. You’ll pay your parents a token amount of rent, but most of your savings will go directly into your house down payment fund. Tell your parents to think of the grandchildren you’ll be raising in the house you’re saving for.

Yearly rent at $800 per month: $9,600
Minus token rent payment to parents: $2,400
One-year savings: $7,200

2. Move down one level of rental

If you have a two-bedroom apartment, try going down to one bedroom. Or, trying squeezing into a bachelor apartment. You could also look at moving to a cheaper part of town, as long as it won’t jack up your commuting costs. Get rid of stuff that won’t fit in your new, smaller place, or store it in your parents’ basement. Don’t spend money on a storage unit.

Yearly rent at $800 per month: $9,600
Minus yearly rent at $650 per month: $7,800
One-year savings: $1,800

3. Sell your car and take the bus

You’ll be saving on fixed costs such as parking, insurance, gas, maintenance and possibly car payments, and you’ll be protected against the risk of financially catastrophic four-figure repair bills. Rent a car or use a car-sharing service for those times when the bus won’t cut it. A cheap bike will help you save on bus fare.

Estimated annual cost of gas, insurance and maintenance and parking: $5,000
Minus estimated annual cost of a bus pass and occasional car rental: $1,500
One-year savings: $3,500

4. Stop buying lunch

A pain, but worth it. You’ll have to think ahead by either picking up the right groceries to make your own lunch, or by scooping up after-dinner leftovers. Healthier than your food-court lunch, which you’re probably sick of anyway.

Estimated cost of buying lunch at $8 or so per day: $2,000
Minus cost of spending about $15 per week to stuff to make your lunch with: $750
One-year savings: $1,250

5. Dial down your vacations

New York is out. Maybe Buffalo. For West Coasters, maybe Seattle instead of Hawaii. Use the likes of Airbnb (airbnb.ca) to find cheap accommodations instead of staying in a pricey hotel. Or stay home and use some of the money you saved on hotels to try some nice restaurants in your town. This is good practice for when you own a home and find that fancy vacations are unaffordable without going into debt.

Summer vacation somewhere in the U.S.: $2,500
Minus the cost of a Staycation: $500
One-year savings: $2,000

6. No pets

Buy a house, and then get a dog, cat, ferret, parakeet or whatever. Pets don’t cost a lot on a day-to-day basis, but vet bills will blow your mind if something goes wrong. Protect your house down payment fund.

Food, vet, toys etc.: $500
One-year savings: $500

7. Put a $100 price limit on birthday presents

Extravagant presents are fun to both give and receive. But they’re a luxury for people who are more financially settled than someone who is madly saving for a house down payment.

Yearly cost for a couple of buying presents for various occasions: $1,000
Minus using the $100 present limit: $500
One-year savings: $500

8. Cut your cable TV and landline

Almost like heat and hydro, an Internet connection is essential. But a home phone is dispensable if you have a smartphone, and cable TV can be replaced by Netflix, watching shows online and using an HDTV antenna. Also, try buying up DVDs of movies and TV show seasons at garage sales, or find stores that sell used DVDs, CDs and videogames.

Yearly cost of cable and home phone: $1,200
Minus approximate cost of a Netflix subscription: $110
One-year savings: $1,090

9. Halve your spending at restaurants and bars

Studies of Generation Y spending habits show that going out to eat and drink is big. Hey, everyone needs a hobby. But this one is too expensive for people who are set on buying a house. Aim to eat out less often, and rather than pay marked-up restaurant or bar tabs, grab a beer from the fridge.

Annual cost of spending $250 monthly: $3,000
Minus half that annual cost: $1,500
One-year savings: $1,500

And one more thought: Ask for a raise at work!

Take the exact amount of your raise on an after tax-basis every payday and direct it into your down payment fund.

Source:  ROB CARRICK The Globe and Mail Published Monday, Jul. 21, 2014

(Karen Roach/iStockphoto)

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Calgary helps first-time buyers get co-funded homes

At least 208 families were able to purchase new homes last year with only a $2,000 down payment for each property, thanks to a Calgary venture that allows first-time buyers and financially struggling households to get real estate via cost-sharing.

Attainable Homes, a social enterprise by the City of Calgary, collaborates with industry professionals such as builders, developers, lenders, and lawyers to make the costs of purchasing houses more manageable for Calgary locals.

“Our partner lenders can provide advice to help people improve their credit rating. They can also help people plan ahead for attainable home ownership in the future,” Attainable Homes communications manager Marissa Toohey told theCalgary Herald.

This arrangement can be especially helpful for young first-time buyers, who often have to save a disproportionate amount of their incomes to accumulate the funds for buying a home.

According to mortgage broker Richard Anderson, the continuous upward trend in real estate prices is leaving many millennials no choice but to co-fund their first home purchases with their parents.

“About 30 per cent of first-time home buyers get gifts from family members, either for a partial or all of the down payment,” Anderson stated.

“On insured mortgages, the down payment is five per cent of the first $500,000 and 10 per cent on the balance above that up to $1 million. So if you buy a $700,000 house, your down payment would actually be about 6.4 per cent,” he added.

Anderson said that another option that young would-be buyers can entertain is RRSPs, which they can engage in up to a maximum of $25,000 without any tax consequences.

Source: MortgagebrokerNews.ca – Ephraim Vecina | 04 Mar 2016

 

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Before I purchase a home, how do I determine what it will cost me each month to carry it?

It can be tempting to jump into a purchase before considering what it will cost you each month to run your home, so good for you for thinking ahead.

We encourage consumers to be informed before they make a purchase. One of the ways to do that is to work with your real estate professional to get the information you need about a home’s carrying costs.

Aside from your monthly mortgage payments – and optional mortgage, life or disability insurance, if you choose to buy it or are required to – there are a number of costs you and your salesperson can determine before you put in an offer.

First of all, taxes for the property should be on the listing information, but your salesperson should confirm the amount. Be aware that, depending on time of year, the amount listed could be from the previous taxation year and so your taxes for the current year could be higher.

The same applies for condominium fees. The listing information should contain the actual fee amount, but your salesperson should confirm that number and what it includes.

There are also a number of monthly costs for keeping the house in good working order. These include your heat source – which could be electric, gas, propane, oil or wood – as well as your hydro costs and any fees for municipal water, sewer or garbage pick-up.

The home may also have a number of rented or leased items you need to know about. For example, homeowners can either own or lease their furnace, hot water tank, air conditioning unit or ducting.

Your salesperson can ask the homeowner for copies of previous utility and service bills. However, not everyone uses utilities and services at the same rate, so the amount you would end up paying could be different than what you see on the bills.

If you decide to buy a condominium, some come without a parking space included in the price, so you may need to rent one. A locker is also a possible rental cost in condos.

When you purchase a home, you must also buy liability and property damage insurance or you won’t be able to get a mortgage. You can get quotes from a number of insurance companies and pick the one you think gives you the best coverage at a price you can afford.

Depending on the size of the property or your physical abilities, there may be costs associated with land maintenance, such as grass cutting, gardening, eaves trough maintenance and snow clearing. The same is true for cleaning the inside of the home, if you are considering upsizing or clearing snow for that matter.

While some of these costs are usually seasonal, they should still be factored into your budget for the months in which they apply. Again, your salesperson can ask the homeowner for past bills for those services if they have used them.

And finally, it would be wise to set aside “rainy day” funds on a monthly basis for repairs that come up over time with home ownership.

There is no doubt it is a smart move to consider the ongoing costs of maintaining a home before you buy, and a registered real estate person can help you determine those costs. After all, what good is buying your dream home when you can’t afford to carry it?

Source: Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube athttp://www.youtube.com/RECOhelps.

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The world has 41 per cent more migrants now than in 2000, UN reports

Canada is home to the seventh largest number of migrants, around eight million, who have arrived from foreign countries  — people like Maria Karageozian and her father Hagop, who were reuinited at the Armenian Community Center of Toronto on Dec. 11, 2015.

Canada is home to the seventh largest number of migrants, around eight million, who have arrived from foreign countries — people like Maria Karageozian and her father Hagop, who were reunited at the Armenian Community Center of Toronto on Dec. 11, 2015.

The number of people who migrated to foreign countries surged by 41 per cent in the last 15 years to reach 244 million in 2015, according to a United Nations study released Tuesday. Of those people, 20 million are refugees. The UN is planning a series of meeting to address migration in 2016, including a March 30 gathering in Geneva where countries will be invited to pledge resettlement spots for Syrians fleeing civil war. But while the Syrian refugee crisis has gripped the world’s attention, it is but a drop in the sea of international migration.

Here are some highlights from the report.

 

Where are migrants going?

The vast majority go to Europe, home to 76 million international migrants in 2015, or two-thirds of the total. By individual country, however, the United States had by far the largest portion of the world’s migrants — 47 million, or a fifth of the total. Germany and Russia shared the No. 2 spot with about 12 million each, followed by Saudi Arabia (10 million), Britain (nine million) and the United Arab Emirates (eight million.) Canada ranks seventh on this measure, with slightly fewer than eight million migrants.

 

Where are migrants coming from?

The largest portion comes from Asia: about 104 million or 43 per cent. While Europe takes in the biggest number of migrants, it also contributes a large number: 62 million, or 25 per cent of the total. Latin America and the Caribbean was the third-largest regional source of international migration, with 37 million, or 15 per cent. Only two per cent (four million) are from North America.

India had the world’s biggest diaspora, with 16 million people, followed by Mexico (12 million), Russia (11 million), China (10 million) and Bangladesh (seven million) and Pakistan and Ukraine (six million each). The UN counts around 1.3 million Canadian migrants living abroad.

Who are the migrants?

 They are almost equally divided by gender: 48 per cent are women. Not surprisingly, most are working-age. The median age of migrants in 2015 was 39. A significant portion — 15 per cent — were under 20 years old. But country populations will not get any younger as a result. The UN said international migrants can help ease old-age dependency ratios in some countries but will not halt the long-term trend toward population aging. All major areas of the world are still projected to have significantly higher old-age dependency ratios in 2050.

What does this mean for the world population?

The vast majority of the world’s people stay put. Migrants made up just 3.3 per cent of the global population in 2015, up from 2.8 per cent 15 years ago. Still, international migration is growing faster than the world’s population, with significant consequences for many regions.

Migrants make up 10 per cent of the populations of Europe, North America and Oceania. In North America and Oceania, migrants have contributed to 42 per cent of population growth since 2000. It was a different story in Europe, where the population would have declined over the same period had it not been for the influx of migrants. Even if current migration levels continue, Europe’s population is still projected to decline over the next 35 years because of its surplus of deaths over births.

Source: Alexandra Olson The Associated Press, Published on Wed Jan 13 2016

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